Volatile bonds anna we will be digging into those commodity stories, but in less than half an hour to the european open, lackluster if you are looking at risk appetite. Calm before the bank of japan and fed storm tomorrow, off by 3 10 of a percent. New female news as a takes them for glaxo in march. Guy lets talk about was happening to the gmm. Great way to start your day. Great gains yesterday for equity market, the ftse outperforming, doing solid business yesterday to the upside. Today, the focus is going to shift toward whats happening with the central bank story. The yen is on the move. Fx markets are reasonably calm, the little bit of strength coming through against the u. S. Dollar. Zinc also on the rise, up by 2 . Well really dig into the commodity story a little later on in the program. A great conversation coming up, the relationship with equities front and center. I want to quickly show you Deutsche Bank, with whats been happening at the selloff. Stabilization, but we will watch that creativity coming out. Its a big story. Cant take your eyes off that one. Lets get the bloomberg first were news with Tom Mackenzie in beijing. Tom thanks. Authorities have charged the man they believe responsible for the new york bomb attack. The 28yearold, naturalized u. S. Citizen and afghanistan native, was arrested after a shootout with police. He is facing five counts of attempted murder of a Law Enforcement officer. Officials say they do not believe he operated as part of a terrorist cell and are not actively seeking any other suspects. The off the dollar rose following the release of minutes from the rbas september meeting. The Central Bank Left borrowing costs unchanged, saying it is helping the economists absorb a fall in business investment. The minutes also showed new governments pay tribute to his predecessor, saying Glenn Stevens made exceptional judgments during a challenging period. Wells fargo ceo john stumpf will say that the bank failed customers and the wider public by reacting to slowly to signs of false accounts. Hell say he is deeply sorry and lay out a timeline showing how the bank will tackle misconduct. Wells fargo stock has tumbled as a result of the scandal, losing his title as the worlds most valuable bank. Global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. This is bloomberg. Caroline . Caroline thank you very much. Japanese stock market reopens todays as traders position themselves ahead of the key boj and fed decisions. Lets see how markets are moving. David ingles has it in tokyo for us today. David, walk us through the market moves, the caution before the decision. David as you would expect. Have a look at my chart behind me. This is last friday. This is what markets closed, a mixed picture. A lot of that was down to the heaviest weighted stock in japan, 7 of the index pulled down. Topix a little bit higher. But in all fairness we did see most stocks in japan with a higher as well. But as he mentioned it is really just a lack of volume, a lack of big bet. The boj started their meeting today; this time tomorrow we will get a better idea. Well that the press conference from government corrode a. Governor corona. Kuroda. We will shut yesterday, your trading tomorrow, that things shut, and then the fed comes up in a few hours. Calendar and you dont understand why they have been closing their yen positions out there. Guy lets talk about the positioning and whats happening here. Or potential for a big move, as one of our columnists has written, a messy move, on the backend he talks about them getting neutral. How are we positioned . David right. If you look at how leverage funds were positioned as of friday, they were still net long on the japanese yen, almost double the average for the year. But that being said, we dont know which way it will move. Whats clear is that any move is going to be big, not because of the big bets but the lack of liquidity in the system. Let me flip this and have a look at implied volatility. There we go. The green circle is where we are. That was right before the previous meeting of the boj. We did get a spike overnight. The bank of mitsubishi, they are commenting on the strike. That is your normal level in blue, the 50 day moving average. What they are saying is that we are not back to the level of july, simply because markets are not expecting the boj to exceed expectations. Guy thanks, david. David warming is up for what could be an interesting trading session. Ofember that we have got two the primary dealers in the United States, are clays and bnp, both saying we could see a shock from the fed. Were pricing in a 20 chance that we could see a hike from the fed this time around. Joining us now is our guest, the head of fixed interest at invest ake. Good morning. How messy could be at the back end of the week at the boj . They could be messy. I dont remember so many permutations as to what the outlook could be there are four or five things. No one really knows. Guy what do you do . You probably dont do much. Is iyou sit in the sidelines and wait. It will be too large a risk. Caroline give me a sense, i want to look at my screen, on the bloomberg we are starting to see that is at the boj we care about when it comes to the end, where is the fed we care about . On the blueline we are seeing the law to the fed rate hike, and the white line as we build up toward a higher probability or lower probability of a rate hike, that affects the yen. If we go lower probability were likely to see a spike higher. How much is the yen dictated by what the fed does rather than the boj . Shouldrly the dollar mutate on with the fed does. But i would say that the boj is definitely in the driving seat with regards to the yen, although clearly we have seen a strong yen all year, despite the weakness we saw in january. Some things dont work out. The boj is definitely in the drivers seat. Do you buy this theory that the primary dealers of the United States are going against the market . It is right to do this in advance of going against the market. Their argument is that the fed is going to reassert its independence, that refers to the government and not the market. They will be interesting to see whether they make that decision that we are in charge. The dog like the tail, not the other way around. I think the fed will be very worried but the negative consequences of not informing the market sufficiently beforehand. I think everything is in place for the fed to hike. Thereinancial conditions, if the fed doesnt doin it now, it is running out of time. December will be the next opportunity, quite late in the cycle. I understand the arguments. Guy i just have to show you a chart before we wrap this chunk up. This is usd, threemonth libor. Chartit has been rising quite aggressively. Financial conditions are tightening. Discuss, discuss, discuss. The things i look at the cost of corporate debt has tightened, particularly since the middle of february. Guy what is the fed me to do it . Because we are very late in the cycle. Interest rates are too low for where we are and we have unemployment allison 5 . Traditionally this would be quite late in the cycle. Guy you arent going to accept the phillips curve to be working. Darren will stay with us, joining us from invest tech. Caroline great discussion. Coming up, from the boj to the fed, will talk the other huge centralbank meeting today as two of the feds primary dealers warn of a shock hike. Plus, nigerias crude reality. In an economy battered by low oil prices, we get a Rate Decision from africa. We get what to expect. Still to come, in the world of volatile markets, is a time to get physical . We hear the case of commodities. This is bloomberg. Caroline 50 minutes of the market open. Lets get your Bloomberg Business . Tom thanks. Promoted thene has head of the is a result business to be the new ceo. Shell 16 andrew witty at the helm of the World Largest drugmaker when she retires. She will join the board on january 1 and take the ceo role by the end of march. The move means gsk will be the only Major Global Pharmaceutical Company with the female head. Is considering dropping the monsanto name once its takeover is complete, according to people familiar with the matter. They say the German Company is considering the move to avoid sullying its reputation. The monsantoew, ceo signaled he is open to a change. Has raised ayer combined annual sales peak forecast of over 10 billion euros. Some of the Worlds Largest hedge funds are expanding in asia as they seek new areas of growth. Haveding to filings, three incorporated units in singapore this year while asian hedge funds havent been immune to withdrawals that have placed the industry. Some investors, including chinas sovereign wealth fund, may increase holdings in the region. They are betting they can be rivals in developed markets. Guy thank you very much. Two of the biggest banks are defying the market forecast. A Federal Reserve rate hike tomorrow, an Economist Says traders havent taken the feds intentions to heart. The head of fixed interest is still with us. What do you make that call . You have already indicated you think the market probably is pricing it right, but the problem is that argument becomes so circular so quickly. The fed is worried about the boj, it starts getting shaky, it backs off. We are seeing the script so many times. We have. Maybe its the political dimension as well. A couple months ahead of the election, trump has already been antagonizing about the fed and its independence. They do it now and he will say, they are trying to take part in the political debate, and that is the wrong time. Guy before caroline johnson, can i just that argument to work the other way. If they dont go now they could be accused of getting involved in politics. , dammed if they do stand if they dont. Thats why most people would say, leave it until december so there can be no debate. Caroline tell us how you would advise investors to trade this out amid the political volatility, amid the rate discussion. Do you hold onto u. S. Treasuries for timing . Generally we are holding on bonds. I have to say we are a lot more circumspect about that. We think Interest Rate and bond yields now are so low, that they dont represent quantitative easing is working very effectively, forcing us to invest in spread product, Investment Grade bonds, highyield bonds, emergingmarket debt. Qe is working perfectly in terms of what we are doing, the portfolio effect pushing you into more risk. Guy they will be interesting to see what happens when it reverses. Lets come back to policy. Why hasnt the market price did more risk . 49 days to go into the u. S. Election. Line is that market waking up and getting were concerned . You talk to people and they are worried, that you look at market pricing, flat as a pancake. I agree. There is nothing in the markets. We should start to worry about this for at least a month ago. I guess we have got this weeks decision from the boj, the fed, a lot of focus on that. I suspect was we get past that there is not much, other than the italian constitutional reform in october. I think the u. S. Election will become front and center. Caroline darren, how does that affect assets prices . Where do you want to be within the buildup to the election . I suspect asset prices will go sideways for a period of time, just because there is so much uncertainty. But i have never known there to be so little conviction in what people are doing in the markets. I think the outcome of what could happen, particularly without regard to the u. S. Election, which is heard we must get through. In terms of monetary policy, i think the people who are discussing it are discussing low rates, negative Interest Rates, fiscal policy. I think because of that, theres a chance of outcomes that i dont think has ever been greater. Caroline by darren, thats just saying its not being placed into the market yet. What should investors be doing, if it is going to trade sideways . Which immediate doing if we see this risk . And is currently only 18 of the risk. That the obvious thing you would expect to come out. More volatility, which usually means markets going down. Some people will take this as an opportunity to get more cash, see what happens, then invest after the event. I guess what we have learned is qe, through the policies of they have continued to push asset Prices Higher and i think everyone is worried about that. At the same time, people dont want to lose out on price gains. Guy i wonder how much more there is still to come, and i wonder, looking at the risk, is my upside worth taking the risk, or is the downside becoming greater and greater, and therefore that is what i should focus on . You talked earlier about the portfolio effect. When the tide turns and it starts flowing the other way, a a lot of people could be left without. But to give you another famous quote, back in 1996, greenspan warned of irrational exuberance. You can take Big Decisions and markets and choose not to be in you might miss a number of years of the gain that is the risks. Guy they are quite long in the tooth. Caroline. Caroline just a few minutes away from the open now. Up next, we will look at the potential corporate movers in todays trading. Will glaxosmithkline react to the news of the new ceo . Keep an eye on kingfisher, which could be on the downside. Details next. Caroline 7 53 in london. A rather gloomy berlin. Stocks you need to watch. Two germanys to keep an eye on Deutsche Bank securitizing their loans, trying to continue to service, but get the risk out of the bank it into the investor base. 5. 5 billion was what they did last year. Look for Deutsche Bank, currently unchanged. One stock that is called hire is bayer. Bayer chemicals and pharmaceuticals, buying into seeds in a big way with monsanto, but notably today raising its peak Sales Forecast for drugs it recently started selling, signaling some optimism about the pharmaceuticals business. It splashing 66 billion to get into monsanto as well. Guy we will watch that stock carefully. In westthkline out london, andrew witty stepping down on the 31st of march. Emma wormsley will be taking over, replacing andrew witty. Lets talk diy. Good,sher stocks look done well, beating profit estimates. Both the uk and france doing reasonably well. Im not sure you can read anything into that, but it does seem that we are into it a little more. Five minutes to go to the market open. What do you think about equity market valuations at the moment . It really depends are you in this pina world where there is nothing else, there is no alternative . Cannot change quickly . We are in the tina world. We are very light on the bond proxy story. If you are bearish on bonds then surely you must at least be concerned about the equities that look like bonds predicated on bond yields. Against what we are most concerned about is the rotation within the next two markets. Lets say we get steepening in the yield curve, one of the outcomes being discussed at the boj. You could see a different type of equity doing well. Thats all we have to be from an equity point of view it will be about the rotation. Guy always a pleasure. Darren will stick around through the market open, coming up. Looks like we will open softer here in europe, down by around. 2 . The market open is four minutes away. This is bloomberg. Guy good morning. You are watching on the move. I am alongside caroline hyde, it was over in berlin. We are moments away from the start of european trade and and caroline has the morning brief. Caroline the fed and the boj are about to begin their meetings. Deutsche bank gets creative. The lender could prioritize loans to offload risk. And a case for commodities in a world of volatile bonds. Is it time for investors to get physical, guy . Guy we will talk about that a little bit later on, the relationship to equities is absolutely fascinating. Lets talk about what is going to be on the move. We think the stocks are going to be a little bit softer. Keep an eye on john cryan and Deutsche Bank. Lets show you what is happening here. Let me take you to my bloomberg. We expected a little bit of softness, as you can see and that is what we are getting, creeping in here, showing you what is happening. The london market is softening up a little bit. 100. Hite line is the ftse cac is expected to open up a little bit more softly as well. We are beginning to unwind some of those gains with all yesterday, but not by much. Lets show you what is happening with the imap. This is the stock 600 breakdown on a national basis. 0 this is the stoxx 60 breakdown on a national basis. Lets get the details of the gilt market opening as well. Caroline we have seen yields tick lower. It looks like we can see this in the u. K. As well with the tenure year gilt yield. So, this yield, ever so slightly lower here at the open. Living on to moving on tot stocks to dig into. There is definitely more to the downside. Energy stocks look to be leading the losses right now, down 0. 8 , not a surprise given the weaker wti and brent prices. And then health care, the secondworst performer, down 0. 4 . Industrials are following closely behind. Materials are the best performer, pretty much unchanged. Energy is still the biggest loser. Stocks to the top three i wanted to look at. I wanted to start on glaxosmithkline. We heard this morning they have named Emma Walmsley to be the new ceo, succeeding andrew witty when he retires, a move that will make it the only global major Pharmaceutical Company with a female head. Glaxo was called a little bit lower by some analysts at the open. It is down by 1. 2 there. I want to move on now to kingfisher, another u. K. Stock. We had numbers in the 7 00 hour. The company said they have remained cautious on france in the shortterm and that the eu as created uncertainty. This is perhaps why we can see the stock move a little bit. Igher there come up 1. 2 i wanted to take a quick check on bayer. It has raised the peak Sales Forecast. This signal some optimism for the pharmaceutical unit, even as the company spends 66 billion to purchase monsanto. Guy . Guy now, lets talk banking. Deutsche bank is under pressure. It is trying to secure millions of dollars in corporate loans, john